2. In spite of
service of notice and in spite of repeated conveying of information
about the posting of the petition for special leave to appeal for final
disposal, the respondent has not chosen to appear. We think we have
waited enough for the appearance of the respondent and no further
indulgence is warranted. Heard counsel for the appellant.

3. The appellant
invited tenders for construction of sheds near its Swimming Pool at an
estimated cost of Rs.10.70 lakhs. Respondent No. 1 submitted its tender.
The tender form submitted by the respondent contained the following
clause:
"Clause 25A. (1) If any dispute or difference of any kind whatsoever
shall arise between the vice-Chancellor M.D.U. Rohtak, and the
contractor in connection with or arising out of the contract, or the
execution of the work that is (i) whether before its commencement or
during the progress of the work or after its completion, (ii) and
whether before or after the termination, abandonment or breach of the
contract it shall in the first instance be referred to for being settled
by the Executive Engineer in charge of the work at the time and he shall
within a period of sixty days after being requested in writing by the
contractor to do so, convey his decision to the contractor, and subject
to arbitration as herein after provided, such decision in respect of
every matter so referred, shall be final and binding upon the
contractor. In case the work is already in progress, the contractor will
proceed with the execution of the work on the receipt of the decision of
the Execution Engineer-in-charge as aforesaid, with all due diligence
whether he or Vice-Chancellor, M.D.U., Rohtak requires arbitration as
hereinafter provided or not. If the Executive Engineer, in-charge of the
work has conveyed his decision to the contractor and no claim to
arbitration has been filed with him by the contractor within a period of
sixty days from the receipt of letter communicating the decision, the
said decision shall be final and binding upon the contractor and will
not be subject matter of arbitration at all. If the Executive Engineer
in-charge of the work fails to convey his decision within a period of
sixty days, after being requested, as aforesaid, the contractor may,
within further sixty days of the expiry of first sixty days from the
date on which request has been made to the Executive Engineer in-charge
request the Vice-Chancellor, that the matter in dispute be referred to
arbitration, as hereinafter provided.

(2) All disputes or
differences in respect of which the decision not final and conclusive
shall at the request in writing of either party, made in communication
sent through registered A.D. Post, be referred to the sole arbitration
to Vice-Chancellor, M.D.U., Rohtak at the relevant time. It will be no
objection to any such appointment that the arbitrator so appointed is a
Government servant or that he had to deal with the matters to which the
contract relates and that in the course of his duties as a Government
servant, he had expressed his views on all or any of the matters in
dispute. The arbitrator to whom the matter is originally referred being
transferred or vacating his office, his successor-in-office, as such
shall be entitled to proceed with the reference from the stage at which
it was left by his procedure.

In case the
arbitration nominated by the Vice-Chancellor, M.D.U., Rohtak is unable
to act as such for any reason, whatsoever the Vice-Chancellor,M.D.U.,
Rohtak shall be competent to appoint and nominate and other
Superintending Engineer or Chief Engineer, as the case may be as
arbitrator in his place and the Arbitrator so appointed shall be
entitled to proceed with the reference.

(3) It is also a
term of this arbitration agreement that no person appointed by the Vice-Chancellor,M.D.U.,
Rohtak shall act as arbitrator and if for any reason that is not
possible the matter shall not be referred to arbitration at all.

In all cases where
the aggregate amount awarded exceeds Rs.25,000/- the arbitrator must
invariably give reason for his award in respect of each claim and
counter claim separately.

(4) The arbitrator
shall award against each claim and dispute raised by either party
including any counter claim individually and that any lump-sum award
shall not be legally enforceable.

(5) The following
matters shall not lie within the purview of arbitration:-
(a) Any dispute relating to the levy of compensation as liquidated
damages which has already been referred to the Superintending Engineer
and is being heard or/and has been finally decided by the Superintending
Engineer in-charge of the work.

(b) Any dispute in
respect of substituted, altered, additional work/committed
work/defective work referred by contractor for the decision of the
Superintending Engineer, in-charge of the work if it is being heard or
has already been decided by the said Superintending Engineer.

(c) Any dispute
regarding the scope of the work or its execution or suspension or
abandonment has been referred by the contractor for the decision of the
Vice-Chancellor,M.D.U., Rohtak and has been so decided finally by the
Vice-Chancellor,M.D.U., Rohtak

(6) The independent
claim of the party other than the one getting the arbitrator appointed,
as also counter-claims of any party will be entertained by the
arbitrator notwithstanding that the arbitrator had been appointed at the
instance of the other party.

(7) It is also a
term of this arbitration agreement that where the party invoking
arbitration is the contractor, no reference for arbitration shall be
maintainable unless the contractor furnishes to the satisfaction of the
Executive Engineer in-charge of the work, a security deposit of a sum
determined according to details given below and the sum so deposited
shall, on the termination of the arbitration proceedings, be adjusted
against the cost, if any, awarded by the arbitration against the
claimant party and the balance after such adjustment in the absence of
any such cost being awarded, the whole of the sum will be refunded to
him within one month from
the date of the awards:

ii) For claim of
Rs.10,000/-and above and 5% of amount claimed
Below Rs.1,00,000/- and above 7= % of amount claimed

The stamp fee due on
the award shall be payable by the party as desired by the arbitrator and
in the event of such party's default the stamp fee shall be recoverable
from any other sum due to such party under this or any other contract.

(8) The venue of the arbitrator shall be such place or places as may be
fixed by the arbitrator in his sole discretion. The work under the
contract shall continue during the arbitration proceeding.

(9) Neither party
shall be entitled to bring a claim for arbitration if appointed for such
arbitrator has not been applied within six months.

(a) of the date of
completing of the work as certified by the Executive Engineer in-charge,
or
(b) of the date of abandonment of the work, or
(c) of its non-commencement within 6 months from the date of abandonment
or written orders to commence the work as applicable, or(e) of the
completion of the work through any alternative agency or means after
withdrawal of the work from the contractor in whole or in part and/or
its recession, or
(f) of receiving an intimation from the Executive Engineer in-charge of
the work that final payment due to or recovery from the contractor had
been determined which he may acknowledge and/or receive. Whichever of
(a) to (e) is the latest.

If the matter is not
referred to arbitration within the period prescribed above, all the
rights and claim of any party under the contractor shall be deemed to
have been forfeited and absolutely barred by time even for civil
litigation now with standing.

(10) It is also a
term of this arbitration agreement that no question relating to this
contract shall be brought before any civil court without first involving
and completing the arbitration proceedings as above, if the scope of the
arbitration specified herein covers issues that can be brought before
the arbitrator i.e. any matter that can be referred to arbitration shall
not be brought before a civil court. The pendency of arbitration
proceedings shall not disentitle the Vice-Chancellor,M.D.U., Rohtak to
terminate the contract and make alternative arrangements for the
completion of the work.

(11) The arbitrator
shall be deemed to have entered on the reference on the day he issues
notices to the parties fixing the first date of hearing. The arbitrator
may, from time to time, with the consent of the parties enlarge the
initial time for making and publishing the award.

(12) It is also a
term of this arbitration agreement that subject to the stipulation
herein mentioned, the arbitration proceedings shall be concluded in poor
ordinance with the provisions of the Arbitration Act, 1940 or any other
law in force for the time being."

Obviously, this
tender form was signed on behalf of respondent No. 1 when it was
submitted to the appellant. It was dated 12.09.2003.

4. The tender so
submitted by the respondent was accepted by the appellant. It was stated
in the letter of acceptance, dated 22.11.2003, singed on behalf of the
appellant:

"As approved by the
tender committee in its meeting held on 12.10.2003 and further approved
by the competent authorities, the acceptance of your tender for the work
cited as subject, is further conveyed to you on behalf of the Registrar,
M.D.U., Rohtak at the rates contained in your tender dated 12.9.2003.
This is subject to the terms and conditions of the approved Detailed
notice inviting tender (INIT) of the above works."
(emphasis supplied)

The date of start of
the work was indicated to be "from the date of issue of this letter."
The time limit was fixed as four months. It contained a further
stipulation:
"You are requested to contact the SDE (C-1) M.D.U. Rohtak for taking the
work in hand. The document containing the detailed terms and conditions
of the contract are ready and you are requested to attend this office on
any working day for signing the same. No payment will be made to you
unless you sign the contract agreement. The contract stands concluded
with the issue of this communication."
(emphasis supplied)

The respondent,
admittedly deposited an earnest money of Rs. 10,700/-

5. It is the case of
the appellant that the site was not demarcated. It is common case that a
document containing detailed terms and conditions of the contract as
envisaged by the acceptance letter was not signed by the parties. In the
letter dated 8.3.2004 the appellant informed the respondent that it had
decided not to get the work executed. The letter also called upon the
respondent to get the earnest money of Rs.10,700/- refunded.

6. The respondent
issued a notice to the appellant invoking clause 25A of the tender
conditions quoted above, calling upon the appellant to appoint an
arbitrator in terms of that clause on a claim that on acceptance of his
tender, the respondent had made arrangements for commencing the work,
had put up sheds, had engaged labourers and had procured materials and
on cancellation, losses have been incurred and the respondent was
entitled to recover the same from the appellant. The appellant took the
stand that under clause 13 of the tender conditions, the appellant was
entitled to decide not to proceed with the work and no claim, as made on
the side of the respondent, was maintainable. Clause 25A had no
application. The claims were also factually disputed.

7. In that context,
respondent No. 1 invoked the jurisdiction of the District Court under
Section 11 of the Arbitration and Reconciliation Act, 1996 (for short
'the Act') seeking the appointment of an arbitrator. After referring to
the invitation for tenders, its submission of tender, and of its
acceptance, the respondent also disclosed that no agreement was signed
between the parties but asserted that the conditions mentioned in the
tender form were made applicable. The respondent requested to the court
to call upon the appellant to produce the original tender form submitted
by the respondent. The appellant accepted the fact that the tender of
the respondent had been accepted. But the appellant was not liable to
pay any damages in view of clause 13 of the tender conditions. No
payment was to be made unless the contract agreement was signed. It also
contended that the dispute that was sought to be raised by the
respondent was outside clause 25A of the tender conditions relied on by
the respondent.

8. The District
Judge, controlled as he then was, by the decision in Konkan Railway
Corporation Ltd. & Anr. vs. Rani Construction Pvt. Ltd. (2002 (2) SCC
388), appointed the Superintending Engineer as arbitrator by relying on
clause 25A of the tender conditions, leaving it to the parties to raise
all objections, including the objection to his jurisdiction, before the
arbitrator in terms of Section 16 of the Act. Feeling dissatisfied, the
appellant filed a writ petition before the High Court relying on the
decision of this Court that since the order based on the application
under Section 11 was an administrative order, a writ petition was
maintainable, by referring to State of Orissa and others vs. Gokulananda
Jena (2003 (6) SCC 465 = AIR 2003 SC 4207). The High Court held that the
objections sought to be raised could be raised by the appellant before
the arbitrator and there was no reason for the High Court to interfere
with the order appointing an arbitrator in the circumstances of the
case. It is feeling aggrieved thereby that the appellant has come up
with this appeal by special leave.

9. Learned counsel
for the appellant submitted that no contract as contemplated by the
parties containing the detailed terms and conditions was signed by the
parties and in the circumstances there was no arbitration agreement as
understood in the Act justifying the appointment of an arbitrator.
Counsel brought to our notice Section 7 of the Act. Counsel also
referred to the fact that in the subsequent decision in S.B.P. & Company
vs. Patel Engineering Ltd. & Anr. (2005 (8) SCC 618) this Court has
overruled the decision in Konkan Railway Corporation Ltd. & anr. (supra)
and the ratio thereof is no more available to the respondent. Counsel
also referred to the decision in Willington Associates Ltd. vs. Kirit
Meta (2000(4) SCC 272) to submit that a question whether there was an
arbitration clause or not, had to be decided by the court even under the
dispensation recognized by the earlier decision in Konkan Railway
Corporation Ltd. & anr. (supra). Counsel submitted that in view of the
fact that a contract in writing had not come into existence by both the
parties by affixing their signatures as contemplated by them, there was
no concluded contract in the case on hand and it was just and necessary
to interfere with the order appointing the arbitrator. As we have
indicated earlier, the respondent has not chosen to appear before us to
answer these contentions.

10. The present case
is governed by the procedure that was available when Konkan Railway
Corporation Ltd. & anr. (supra) held the field. That orders already made
were not to be affected by the ratio of the decision in S.B.P. & Company
(supra) is clear from paragraph 46 of that decision wherein prior orders
and proceedings have been saved. Therefore, the only question for
decision is whether the fact that the parties have not signed the
contract containing the detailed specifications as contemplated by the
letter of acceptance ould preclude the respondent from seeking an
arbitration by falling back on clause 25A of the tender conditions
quoted above. It is true that when parties during negotiations
contemplate the execution of a formal agreement incorporating the terms
of the bargain, so long as a formal agreement has not been entered into,
it may be open to contend that there was no concluded contract between
the parties. As against this, what is the position in a case where the
tender submitted is accepted, its acceptance conveyed and the time for
completing the work is stipulated to start from such acceptance, and the
work was to commence on the basis of that acceptance but no payment was
to be made until a formal contract was signed, is the first question
that arises in this case. We think that in the circumstances, this is a
question that must be left to be decided by the arbitrator, since in
terms of Section 16 of the Act the question can be raised before the
arbitrator. Considering that we are dealing with the pre S.B.P. &
Company (supra) dispensation, we do not think that it is necessary or
proper for us to go into that question and decide the same in these
proceedings. Same is the position regarding the scope of clause 13 of
the tender and the clauses relied on by counsel for the appellant in his
attempt to take the present claim out of clause 25A of the tender
conditions. We are, therefore, satisfied that it would be appropriate to
leave this question, as also the other questions to be decided by the
arbitrator rather than our trying to answer them at this stage in view
of the fact that this case is not governed by the principles recognized
by S.B.P. & Company (supra).

11. But we make it
clear that the arbitrator, in the first instance, has to decide whether
the existence of an arbitration agreement in terms of Section 7 of the
Act is established and also to decide whether the claim now made is a
claim that comes within the purview of clause 25A of the tender
conditions in case it is found to be an agreement within the meaning of
Section 7 of the Act. Only on deciding these two aspects can the
arbitrator go into the merits of the claim made by the respondent. But
we clarify that it does not mean, that he should treat these two aspects
as preliminary issues and decide them first; but only that he must
decide them without fail while proceeding to finally pronounce his
award.

12. In this view of
the matter, we see no reason to interfere with the appointment of an
arbitrator. We dismiss this appeal giving liberty to the parties to
raise all their contentions based on lack of jurisdiction of the
arbitral tribunal before the arbitrator. The arbitrator will permit the
appellant to amend or supplement the objections already filed by it if
it is felt necessary by the appellant. We make no order as to costs.